The Basics of the Australian Aged Pension

We work with our clients to reduce their reliance on the Commonwealth Government Aged Pension as much as possible.  That said we look after the full spectrum with some clients receiving the full aged pension from aged 67 (or 66 years and 6 months for those born prior to 1 January 1957), others may not be eligible, as they generate too much income to qualify based on the Income test, or their asset value is too high to qualify under the Asset Test.

For up-to-date rates please refer to the Services Australia Website – servicesaustralia.com.au.  The below information is accurate as at April 2022.  This information is provided as a guide only and does not cover all circumstances.

Normal Rates

Per fortnightSingleCouple eachCouple combinedCouple apart due to ill health
Maximum basic rate$900.80$679$1358$900.80
Maximum Pension Supplement$72.70$54.80$109.60$72.70
Energy Supplement$14.10$10.60$21.20$14.10

What is the Income Test?

Services Australia assesses your and your partners’ fortnightly income from all sources including financial assets such as superannuation.  The following table contains a summary of income that you can receive each fortnight and still receive the aged pension, as well as the reduction for additional earnings and the cut-off after which you are not entitled to the Aged Pension.

Max Income per fortnight to receive full pensionAmount your pension will reduce byCut off point (per fortnight)
Single Person$18050 cents for every dollar about $180$2,155.20
Couple (living together)$32050 cents for every dollar above $320$3,297.60

What is the Asset Test?

Services Australia assess all assets and your relationship status as part of the assets test in order to determine your eligibility for the aged pension.  Your assets include any property or possessions you own in full, in part, or have an interest in and this can include assets held outside Australia and debts owed to you.

If the value of your assets exceeds the asset value to receive a full pension, your fortnightly pension payment will reduce until your asset value exceeds the cut-off point.

Max Asset Value to receive full pensionCut off point
Single Person Non-homeowner$487,000$816,500
Single Homeowner$270,500$599,750
Couple Non-homeowner (living together)$621,500$1,118,000
Couple Homeowner (living together)$405,000$901,500

Am I eligible for the Seniors Concession Health Care Card?

In order to receive the Commonwealth Seniors Health Care Card you must meet all of the following conditions:

  • Be Aged Pension age
  • Meet Residence rules – be living in Australia, have Australian Citizenship, a permanent visa, or special category visa
  • Not be receiving a Department of Veterans Affairs payment
  • Provide your Tax File Number or be exempt from doing so
  • Meet Identity Requirements
  • Meet the Income Test (see above)

Converting your Superannuation to Pension Phase

Once you reach your preservation age and have met a condition of release, you can convert your Superannuation into pension phase.  For details on preservation age, please refer to the “Can I afford to retire early?” link.   Standard conditions of release are:

  • Has reached preservation age and retired
  • Has reached preservation age and has commenced a transition-to-retirement income stream
  • Ceasing an employment arrangement after age 60, even if you get a new job with a new employer
  • Turning 65
  • Becoming permanently incapacitated, diagnosed with a terminal medical condition or death.

Once you convert your superannuation to pension phase, earnings inside the pension account, along with pension payments, are tax free.  Note that pension payments are assessable for calculation of your aged pension benefit (if applicable).  Once your account is in pension phase you need to elect a draw-down rate that is equal to or greater than the rates outlined in the below table.

AgeTypical Pension Draw-down rates
Recommending 2023/ 2024
Amended Drawdown rates (due to Covid Pandemic)
2019/2020 through 2022/2023
Under 654%2%
95 or more14%7%

So, for example, once meeting a condition of release and converting their Superannuation into Pension phase, someone with $100,000 in their Pension Account at age 65, they would typically have to draw 4% or $4000 per annum.  Due to the applicable rates for the 2022/2023 financial year, they would only have to draw 2% of their pension balance or $2000 per annum as a minimum.  You can draw more than the minimum payment and can also make lump-sum withdrawals from your pension account.

This article is intended as a brief introduction to “Aged Pension Basics” and is for educational purposes only.  For more information please get in touch with the team at Fleming Financial Planning to discuss your particular circumstances.

Source: ato.gov.au

This website contains information that is general in nature. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.